- Pressure to Incorporate Stakeholder Interests
- Legal and Economic Implications
- Director and CEO Views on Stakeholders
- ESG Metrics and Disclosure
- External Assessment of ESG
This chapter is from the book
This chapter is from the book
This chapter is from the book
Director and CEO Views on Stakeholders
We have seen the pressures that companies face to adopt stakeholder-friendly initiatives and the legal and economic implications of these initiatives. What are the viewpoints of corporate directors and executives on this issue? Survey data suggest that they embrace the concepts behind advancing stakeholder interests and generally are satisfied with the decisions their companies make to address stakeholder needs within the constraints of maximizing shareholder value.
A survey of corporate directors conducted by PricewaterhouseCoopers revealed that many directors accept, at least in part, the concept of a stakeholder orientation. Four out of five directors believe that social purpose and corporate profitability are not mutually exclusive. Three-fourths believe that companies should have a social purpose. A lower but still significant percentage (58 percent) believe that stakeholder needs should be prioritized alongside shareholder needs in making company decisions.
Many directors also believe stakeholder needs should be incorporated—again, in part—into strategic planning and investment. Approximately half believe ESG-related issues should be part of strategic formulation. Slightly more than half (57 percent) say they should be part of the company’s risk management framework. However, corporate directors also believe that some of the external focus on ESG—including board diversity, environmental sustainability, and corporate social responsibility—is excessive.38
Corporate executives also appear to embrace the concept of addressing stakeholder needs and claim that they currently do so as part of their long-term planning. They do not agree that increasing shareholder value requires that stakeholder needs be ignored or disregarded. A 2019 survey of CEOs and CFOs found that almost 90 percent incorporate stakeholder interests into long-term planning. They also purport to balance stakeholder and shareholder interests, and claim to be satisfied with the job their company does to meet the interests of their most important stakeholders.
Executives also do not believe that incorporating a stakeholder orientation into corporate planning requires a trade-off between short-term costs and long-term benefits. In fact, only 12 percent of CEOs and CFOs hold such a view. Instead, most believe either that investing in ESG-related initiatives is costly in both the short and long terms (37 percent)—in which case it is not worth doing at their company—or that ESG initiatives are beneficial in both the short and long terms (28 percent)—in which case the decision requires no trade-off and is not difficult to make.39
Finally, many CEOs and CFOs do not believe their largest investors see stakeholder considerations as being in conflict with their financial interests as owners.40
These are perception-based data, but they suggest that in the eyes of corporate decision makers, most companies try to strike an appropriate balance in pursuing shareholder value without imposing harm or cost on stakeholders. Most companies believe they are already sustainable.
